That’s right. Wells Fargo is ending its popular consumer lending product — the personal line of credit — for the sake of “simplifying” offerings. For those of you who have no idea what’s going on, let’s break it down.
What’s a personal line of credit?
A personal line of credit is like a credit card: You get a credit limit based on your credit history and income, which then permits you to borrow up to that limit on an ongoing basis. The system was initially there to produce high-interest debt at a lower rate, as well as enable consumers to pay for expensive side projects like house renovations.
So, why did Wells Fargo end personal lines of credit? Well, supposedly, the bank is trying to be better at providing for your borrowing needs, going so far as mentioning credit cards and Wells Fargo personal loan products as an alternative. But it didn’t emphasize how the change could alter customers’ credit scores and utilization rates.
Now what do you do?
Trusting banks can be hard, especially when they make difficult decisions that put your future at risk. However, Wells Fargo has confirmed that their customers will get a 60-day notice before their accounts close. The remaining balance on these accounts will have an attached fixed interest rate and a monthly minimum payment requirement.
While we wait for more clarification from the bank, the best thing to do is pay attention to the details of the payment plan cited in the letters being sent out. And to make sure you pay those monthly payments in time! They still count.
Of course, you can also use this opportunity to look for products that better suit your needs: Research reward cards or personal loans with a lower rate. Go out and compare credit cards to loans—Just never forget that you have options!